Steven Mnuchin, US Treasury Secretary – pictured with wife Louise Linton – is representing the United States at the G7 financial summit in Whistler, CanadaGermany’s Minister of Finance Olaf Scholz and Japan’s Minster of Finance Taro Aso arrive at the welcome reception dinner at the G7 event on Thursday night

The European Union, Canada and Mexico retaliated yesterday after the US imposed tariffs on imports of steel and aluminium.

All three hit back with charges that will hurt American competitiveness by adding billions of dollars to the price of US goods from orange juice and whiskey to blue jeans and Harley-Davidson motorcycles.

The EU has also formally taken the US to the World Trade Organization to challenge the legality of the new tariffs and the Trump administration's national-security justification.

Brussels lodged an eight-page list at the international trade body of goods it would hit with retaliatory measures.

They run the gamut from big motorcycles like Harleys, built on the home turf of House Speaker Paul Ryan, to "canoes", "manicure or pedicure preparations" and even "sinks and washbasins, of stainless steel" - the proverbial kitchen sink.

If the tit-for-tat measures continue, a likely escalation will see the US impose levies on further categories of goods, potentially including Irish whiskey.

Pharmaceuticals, Ireland's biggest single export to the US, are likely to escape the trade war, even if it worsens.

"Almost all countries in the developed world have signed up to a 'zero-for-zero' approach to tariffs in pharma", according to Ryan McGrath, an analyst with Cantor Fitzgerald.

That's good news, but he said the Irish alcohol sector appears to be most at risk. "Irish spirits exports to the US have experienced huge growth over the last number of years and currently there are no tariffs on Irish whiskey in the US. "Although small when compared to pharma, the Irish spirits industry employs 1,500 people."

President Trump's tariffs on Washington's closest allies drew condemnation at home from Republican politicians and from the country's main business lobbying group and sent a chill through financial markets. Tariffs of 25pc on steel imports and 10pc on aluminium were imposed on the EU, Canada and Mexico from today.

"We look forward to continued negotiations, both with Canada and Mexico on the one hand, and with the European Commission on the other hand, because there are other issues that we also need to get resolved," US Commerce Secretary Wilbur Ross said. But the anti-trade action has been branded illegal by America's closest trade partners. EU Trade Commissioner Cecilia Malmstrom said the bloc won't even discuss the issue until the US stands down.

"We were not at the negotiating table. Our offer was: 'You take this gun away from us, we sit together as friends and equals and we discuss', and this would eventually lead to negotiations," Malmstrom told a news conference in Brussels. "We never got this. So now this door for the moment is closed."

The issue dominated as finance ministers from the G7 group of the world's biggest economies met in the Canadian ski resort of Whistler, near Vancouver, where Treasury Secretary Steven Mnuchin represented the US. "I don't want to kid you, we will need to talk about this first and foremost," said Canadian Finance Minister Bill Morneau. "We think it's absurd that Canada is considered in any way a security risk, so that will be very clearly stated by me," said Morneau, who attended Mnuchin's wedding last year and said he considers the Treasury Secretary a friend. "I have every expectation that our other allies around the table will express the same sentiment." German Finance Minister Olaf Scholz claimed the US levies are illegal. "The decision by the US government to unilaterally implement tariffs is wrong, and - from my point of view - also illegal," Scholz told reporters. The trade wars are hijacking a summit that was initially seen as an opportunity to tout the successes of the global upswing. It is severely testing the resiliency of the Western economic alliance represented by the G7.

Mnuchin held a string of bilateral meetings after his arrival in Whistler, meeting Japan's Taro Aso, Scholz and Morneau. America's use of a security justification for its new levies has been particularly badly received, with Germany's Scholz calling the move "spurious".

"We'll always be ready to talk about reaching common agreements on trade policy but that's only possible if unilaterally implemented tariffs are lifted,'' Scholz said.

The G7 finance ministers, along with their central bankers, kicked off the official part of the meetings with a dinner on Thursday, and were holding talks all day yesterday and this morning.

Frictions in Whistler could foreshadow even more high drama at a G7 leaders' summit next week in Quebec which Trump is due to attend. (Additional reporting Reuters and Bloomberg)